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- [00:00]
A
The following podcast contains explicit language. Hello and welcome to the Helipad edition of Slate Money, your guide to the business and finance news of the week Helipads feature. I am Felix Salmon of Axios. I write the Axios Edge newsletter. I am here with Emily Peck of Huffington Post, who writes fabulous things for Oath and. Hello Emily. Hello. And I'm here with Ella Shymansky, who has cast the deciding vote and decided that Amazon is more important than Brexit.
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B
I'm only saying this because we just had a Brexit edition.
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C
Also because it's more important.
- [00:54]
A
We are going to talk about Brexit because all hell is breaking loose in Britain right now. It is quite unbelievable. I'm quite happy we just had the Brexit edition so that you guys are all reasonably up to speed on what's going on. So we don't need to give you too much background because, yeah, shit is going down, man, to use the technical term. We are going to talk about Stevie Cohen because we haven't talked about Stevie Cohen for a while. The guy has more billions of dollars than he had before, which is not unusual when it comes to billionaires. But yes, Emily Peck, you are absolutely right. It is all Amazon. They decided not to do an HQ2 in the end, after spending about, what was it like 18 months traveling around the country talking to cities. Where are we going to put our HQ2? Getting 7 and 8 billion dollar bids from people desperate for this HQC. They were like, never mind. Psych.
- [01:55]
C
Yeah, they got 238 cities to bid. Amazon did over the past year or so. And in the end they decided to split headquarters too, between two obvious choices. Queens, New York, part of New York city, and Arlington, Virginia, part of Washington D.C. part of Washington D.C. and near Jeff Bezos home in Washington D.C. and.
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A
In New York, one is near Jeff Bezos home in New York.
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B
I mean.
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A
Yeah, exactly.
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C
And the helipad title of our podcast today refers to parts of the deal in both cities which require them to build a helipad, essentially so Jeff can get in and out really quick.
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A
This is a big deal in New York City because private helicopter trips and helipads have actually been banned since 9 11. He's carved out like an exception to the rule for himself.
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C
And that's just symbolic of people here in New York are up in arms because the city, lot of people are, not everyone. I saw a look on Anna's face.
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B
But a lot of people.
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A
I was waiting because I, you know, I've had a lot of conversations about this whole long, you know, Amazon to Long Island City thing, everyone thinks it's dreadful. Everyone's really upset about it and I was just waiting to come into the studio today because I knew for the, you know, contrarian actually this is a great thing take, we just need to turn to Anna Shymansky. Is this actually a great thing?
- [03:16]
B
I don't think it's a bad thing. I don't think it's a bad thing for the cities that lost and I don't think it's a bad thing for the cities that got it. I, I think it's hard for me to understand why bringing a tremendous number of very high paying jobs. It's also encouraging. We have a company that's going to be encouraging the city to invest in a lot of the things we want them to invest in, including education, including the transit system. I think ultimately this will be a very good thing for the city. And also I think that for a lot of the cities that were able to bid for this, I know people say like oh it was completely useless. I'm like I don't think it was useless. I think that a lot of these cities were able to get their names in front of Amazon as well as other companies and it also allowed a lot of them to see like well actually why didn't they get this? Well because they need to invest in certain areas that they haven't been investing in.
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A
Hang on a second. Okay, this is that you've brought up a whole bunch of points there which like let's just take these one at a time.
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B
Fair enough.
- [04:11]
A
Firstly, the main thing that the New York City government has promised to invest in is housing. We have a housing shortage in New York City and that site was earmarked for thousands of units of housing which are now going to be a, you know, corporate campus. There was apparently a huge fight between Amazon and New York and Amazon almost walked away over the fact that New York insisted that it not just be a sort of walled off campus so that people actually do need to be able to walk around it and through it like you know, they do all of the Google buildings in New York. Google incidentally has like 20 odd thousand employees in New York already and has not received any kind of taxpayer sweetness at all.
- [04:52]
B
So I agree with you that I.
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C
Am we should add, I don't think we mentioned before you get going again that New York City I believe is giving Amazon 1.7 billion, close to $2 billion in incentives tax breaks. So yeah, to come here, which.
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B
I.
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C
Think is why this deal is coming up for so much criticism because people feel like it was probably inevitable you were going to choose New York City. Why? Why are we prostituting ourselves to Amazon for money that could be used to pay for the things that you say maybe will get invested in thanks to the large.
- [05:24]
A
Well, just to wait. And before, and before you jump in, and I do want to quickly mention this thing where you're like, well, the cities which lost need to invest in abc. No, this has nothing to do with investing. Like, it's not like if Columbus had invested more in abc abcd, then it would have won this headquarters. This is to do with the fact that there's a very, very small number of genuine superstar cities in America. And the ones that aren't can't get there by, you know, doing some clever municipal finance deal.
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B
I actually will very much disagree with that and we can get to that. But I do want to quickly say that I agree with you. I am not a fan of the giving tax benefits to companies to come. I think that's dumb. There is no evidence to suggest that really tends to generate long term, a lot of job growth. So I agree with. I think that that's dumb. Having said that, I will say at least the money that is being given by the cities is earmarked to meeting certain. This Amazon has to meet certain hiring and building benchmarks. So it's not like they're just given a blank check and they can do whatever they want, which is better than some other instances. Now when it comes to cities, this idea that we have a few cities and everywhere else is just like barren wasteland. I don't really think that's true.
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A
Oh, I'm not saying it's barren wasteland. So I was just reading a fabulous press release from a company in Palo Alto called upstart who've decided they're going to hire a whole bunch of engineers and build a kind of weird HQ2 kind of thing. I mean, it's a much, much smaller company than Amazon, but they're building a big operation in Columbus, Ohio. And you're like, great, fantastic. You know, good for Columbus, good for upstart, like, good for everyone. It seems like a great idea to me. And you know, there was a very credible case made that this Amazon use was really good for Toronto. People were saying that Toronto was like, you know, quite high up the short list.
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C
They didn't offer any incentives.
- [07:12]
A
They didn't offer any incentives. But, you know, but it's. But the point is that now all those people in Toronto who would otherwise have gone to work for Amazon are now going to be more available to work for other smaller companies who will be able to drive the economy of Ontario. And it's going to be great. So I have no, I 100% agree that these small, smaller cities are, you know, exciting and growing and can offer a huge amount of things to a huge amount of people. I just don't think that they're ever going to be New York or even San Francisco, la.
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B
They're not necessarily ever going to be New York, San Francisco or la, but that doesn't mean that they can't be thriving cities. We're seeing this, you know, but my.
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A
Point is, but I guess my point is that we saw what Amazon did. Ultimately they decided that they were going to turn down $8 billion from Pittsburgh or whoever it was in order to get essentially almost nothing from Virginia and a billion odd from New York. They realized that they wanted to be in the middle of everything and there's no amount of money that can make up for that.
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B
Well, I actually think, though, that's also kind of a good thing because in the past when we've talked about where companies want to locate, we often talk about, well, they're going to go to the places where you have the cheapest workforce or you have the lowest tax, you, you know, the most tax benefits. And that actually wasn't the case here. No, what Amazon focused on was the idea of we want a place that has, you know, has invested in transportation and in higher education, that has a large pool of talent. That was one of the number one things. And so while, so I think it's, it's kind of a good message to be sending to a lot of cities that the way, if you want to attract businesses, the way to attract businesses is not just by essentially saying you have to pay no taxes, it's by actually investing in these things we want them to invest in. I'm not saying that if, you know, Pittsburgh invests in certain ways, then just magically they're going to become San Francisco. No one's saying that. But I do think that this is sending a good message to a lot of cities about where they actually should be allocating resources. And we are seeing cities like Pittsburgh, like Milwaukee, like a lot of, you know, college towns throughout the Midwest that have actually really turned around since the Great Recession because they have done a lot of these things to attract, not necessarily Amazon, but others, you know, reasonably big companies to come because of how they've invested in education and focused on a Lot of the things that young educated workers want.
- [09:36]
A
I mean, yeah, I don't think Pittsburgh was investing in Carnegie Mellon. More to the point, you know, they, there's a massive opportunity cost for Pittsburgh and Slate had a big article about this that the university basically doesn't pay taxes and neither does the big hospital. And you know, there are trade offs there. But, but the big question which I have about this is that everyone, I mean certainly the way that you are talking about New York and these high paying jobs coming to Queens and all of this kind of thing generally, and certainly that's the way that the mayor is talking about it presents this as a good thing. And from the people I'm talking to in New York, at some point, if you get a whole bunch more rich tech bros coming into a city, I mean it's good financially, probably in aggregate, but it does exacerbate inequality and it does create, you know, problems of gentrification. It's not unalloyed good.
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B
So I, I really do kind of push back on this because I think there's this, I find this odd movement where on the one hand people want everybody to be more well paid.
- [10:43]
A
They want, no, they don't want everybody to be, they want poor people to be more well paid.
- [10:47]
B
Okay, well there's this idea that we want people to have higher wages. But then when people have jobs that have reasonable wa, like oh, these, these overpaid, I'm like, they're not being overpaid. And also Frankly, I mean $150,000 in New York City is good. It's not like you're, you know, killing it. So my, my, my point is just that we, these are the types of jobs we want to create. These are the type of jobs that are going to, that we want to get more people to have the skills to get this type of job. And also the gentrification argument, I really think if you actually look at data on whether gentrification does all of the horrible things it's supposed to, it doesn't.
- [11:18]
A
You don't need to look at data, you just need to look at San Francisco.
- [11:21]
B
San Francisco has a housing problem because of the, like the fact that they won't build anything because you have NIMBYism and because you have horrible building codes that don't allow you to. So they're like, yes, we have anecdotal data that everybody says, oh look, this is what happens. But like actually look at what happened really happens when you have companies that come in, when you have well paid people in an area. It helps the city. It is. I'm not saying there won't be some negatives. Of course there's nothing's an unalloyed good. I'm not saying that. But I'm saying that ultimately do I think it'll be a. Mostly a good. Yeah, I do.
- [11:50]
C
Well, I think a few things first, I think Amazon did everyone a favor by splitting HQ2 into two parts. Because we saw three parts because it was Nashville, because we've saw in Seattle what Amazon has done to that city. Which lots of good things and a. Yes, but also like housing crisis. And one of the more disturbing things I was finding when I was doing research was Seattle wanted to pass Seattle, which declared a state of emergency with regards to homelessness in 2015 tied to yet Amazon, you know, raising rents and the cost of living in that city. They tried to pass a new law which would help the homeless and Amazon disliked it so much it threatened to pull out from part of Seattle. It held a gun to the city's head and the city acquiesced. And I feel like at least in coming to places like New York and Washington, one hopes that they couldn't pull tricks like that here because we.
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A
Yeah, Amazon is not going to be powerful enough in. It doesn't have the same amount of power in New York that it has in Seattle. It doesn't, you know, have the kind of power in New York that, you know, Disney does in Anaheim or, you know.
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C
Right.
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A
It's.
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C
So we have the diversity to support them and we have a media in town that is, you know, cynical and mean and angry that will hopefully keep them in check a little bit too and like curb their power. So in that way maybe it's okay that they came here.
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A
But like, it's worth noting that the New York Post, you know, came out very strongly against this deal. On the front page.
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C
The Wall Street Journal editorial page came out against this deal. Like Ross Douthit is against this deal. It's really interesting, but the other thing I was gonna say is like as far as these high paying jobs exacerbating inequality, I really think Felix has a point. I mean there's this massive housing project right adjacent to where Amazon is gonna.
- [13:38]
A
Locate and the largest in the country, I think.
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C
Yeah, and I mean there was a great piece in the Times that sort of showcased that. And they talked to the people there and they're not gonna, they live right there. They're not gonna benefit from this. It's gonna be importing talent from elsewhere from outside the city. From other places in the city who.
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B
Are going to be using the local establishments who are going to be like, it's not as though people earn money and then they just sock it away solely in their piggy bank.
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A
Anna, come on, let's be honest about this. If you're an Amazon worker in Long Island City, the local establishment you're going to be using is going to be the hipster coffee shop, which if you live in the housing estate down the street, you have neither the ability nor the income to actually make use of.
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C
Yeah, I mean, I just moved out of a rapidly gentrifying neighborhood in Williamsburg and I sort of lived there for 10 years and watched everything change. And like, definitely the area was revitalized and we got more stores and you know, but it was like we lost like the fruit stand and it was replaced by a juice store which had $10 smoothies. You know what I mean? We lost the diner was replaced by like six coffee shops where you could get a lot. Like the people who live in the housing project maybe aren't gonna get the hundred thousand dollar jobs and aren't gonna benefit from the influx, you know, of really high paying would feel, let's say tech bros that come into the area. I think it's, it's complicated. Like in a way gentrification of course does benefit a neighborhood, but there are a lot of major downsides. And you think like a city like New York would care enough about those downsides not to give billions of dollars to mega rich corporations, Especially when the.
- [15:18]
A
Poor people in the neighborhood don't even benefit from increasing property values, that they're hurt by it. Like there are certain types of gentrification in areas which have been where you have owner occupied housing where like at least what happens is that the former inhabitants who wind up getting priced out, you know, manage to cash out to the tune of like a million bucks when they sell their home on the way, on their way to Florida or wherever they move to. Like, even that's not going to happen in the case of public housing.
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B
Right. But number one, I think I would actually just like tell people to actually look at data about whether people are truly priced out in the way that I think people anecdotally often talk about when it comes to gentrification. And also like, look, I'm not saying that there could be no downsides at all. I'm just saying that ultimately I think cities do not say static. I think there's sometimes this idea of, you know, well, we can just, you know, maintain this certain kind of cultural idea in a city and that's great and nothing can ever come in and change that. And cities, either they grow or they decay. And I think that I'm all for having tax dollars used to help people who are in those housing projects. I'm all for that. I'm all for the, the city or the state pushing Amazon to actually have to perhaps invest in things that don't just benefit their workers, but that could benefit everyone in the area. I'm all for that. I'm just saying that I, I find it odd that when we have a company coming in, bringing exactly the type of jobs that we say we want in terms of jobs that have good benefits and good pay, we then push back and say, well, but this isn't going to be good for everyone.
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A
Okay, let's talk about Brexit, because the 535 page draft agreement between Britain and the EU was finally revealed this week and oh boy, did nobody like it. I mean, nobody liked it. The guy who negotiated it, Dominic Raab, the Brexit secretary, it was his agreement and then he woke up in the morning and decided that even he didn't like it and had to resign in protest against.
- [17:23]
C
It's such a party towel, by the way.
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B
Not cool.
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C
Yeah, you can't. That is just so wrong. I saw many people in the UK like making fun of this guy. You can't negotiate a thing and be like, you know what, that was bad and just walk away. Well, it just shows that about it is.
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B
No, but I mean it is just bizarre. But it's like how do you spend this many months negotiating this all of this time and then not really have a sense of how this is going to play once you release it to the public?
- [17:46]
C
Just terrible. Just shows you the quality of leadership over there is bad.
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A
I mean there is no doubt that the quality of leadership in the UK has never. Well, I mean, I'm not going to say it's never been lower because it was actually lower when David Cameron was Prime Minister. But yeah, it's a disaster. It is a shit show. It is as bad as you can imagine because let's back up a little bit and describe this deal. Basically it's an ultra, ultra soft Brexit is what it really is, that Britain effectively winds up staying in the customs union in the free trade area at least through the end of 2020 and probably even beyond then because they're never going to work out deal to deal with Ireland and they still wind up being governed by European laws basically all of the independence that everyone who voted for Brexit was promised doesn't appear.
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C
We should explain the Ireland thing because I don't think we actually talked about it in the Brexit episode. And that seems to be the real sticking point.
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A
So, yeah, the sticking. Okay, so, yeah, to make it really simple, the entire island peace process is based upon this idea that you can just walk back and forth between the border. It's effectively an invisible border between Northern Ireland and the Republic of Ireland. And people live on one side and work on the other and, you know, they live on one side and go shopping on the other and they provide goods and services to the other. And it's. And that's how the Irish problem was solved, basically, that, you know, that people were like, well, so long as the border doesn't really feel like a border, we're not going to be too, you know, terroristic about like, trying to reunite the Ireland. And so this is incredibly important for history and for peace and for prosperity on the island of Ireland. And everyone agrees on both sides of the border that this has to remain a soft, invisible border. You can't just put up, you know, trade barriers. The problem is, of course, that if you have lots of back and forth between Northern Ireland and the Republic of Ireland, then that means you have no trade barriers between the UK and the eu, because the Republic is in the eu. You know, because Ireland is in the eu, Northern Ireland is in the uk. And so then what do you do then? What you have to do is if you have free trade between the Republic of Ireland and Northern Ireland, then if you have a trade barrier between Great Britain and the European Union, then you wind up having to put a trade barrier in the Irish Sea between Great Britain and Northern Ireland. This is completely unacceptable to basically not only everyone in Northern Ireland, but also virtually everyone in the Tory party and pretty much everyone in the Labour Party as well, because they're like, you can't put trade barriers up within your own country. So this is an insoluble problem. And according to the way that this Brexit agreement is drafted, until you solve this insoluble problem, Britain and the United Kingdom essentially would wind up remaining under EU law and having to effectively be part of the EU with less say, and not being able to, you know, make their own free trade agreements or anything with zero say, because they aren't actually members of the eu, they're just governed by it without being members. It's like the worst of both worlds.
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B
Yeah, there's no possible option here that is better than, than just remaining as, you know, a part of the eu. It.
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A
But that said, I mean, I think we can all agree that like, no Brexit is the best option here, but this agreement, this like, you know, draft agreement, which everybody hates, is clearly better than the alternative of a hard Brexit and no deal.
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B
Oh, 100%. I mean, but I think the problem is that you have such conflicting interests here, both within the Tory party, obviously with labor, with. And so I, I mean, I'm always usually of the belief that these type of political crises all play out in the same way, which is that you push it to the last possible moment and then automatically somebody makes a deal because no one but he wants everything. Armageddon. But here I'm actually starting to be like, I don't know, like, I don't know.
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A
And it's coming round to this thing. Like, I remember during the Brexit edition, you're like, oh, they'll work it out. And now it's like, no, they're not gonna work.
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B
I'm actually like, I don't know, you know, like, it's. There does seem to be a greater likelihood that you could actually, they could just fall out of the EU without a deal, which would just be a bit of a disaster. And I mean, I still tend to think the idea that you're gon some type of, like, snap election where labor gets in and then all of a sudden there's another referendum, I still don't really think that's going to happen, but I am starting to think they may just not have a deal.
- [22:24]
A
Right. And, you know, I, I do think that if we wind up ultimately with. I mean, so Theresa May has been very clear and she isn't wrong. Basically, she's like, britain now has three choices. You can have this deal, you can have no deal, or you can have no Brexit. And all of the Remainers, of course, are saying, well, great, let's have no Brexit. That seems like a great idea to me. And if we're going to wind up with no Brexit, which is obviously the best possible outcome here, it seems that this kind of level of chaos and incompetence is more or less the only way we're going to get there. So the probability of no Brexit, I would say, while still low, is higher than it was last week because this has just been such a shit show.
- [23:14]
C
So in other words, instead of coming on that March deadline and all chaos breaking loose and being a hard Brexit, There'll be some kind of, like, delay, like, ahead of March, like, give us some more time to negotiate something, and they'll just keep kicking that can down the road. Give us more time to negotiate.
- [23:28]
B
And it seems like even that is going to be hard. So I guess I'm wondering. To me, it seems like they're going to probably fall out. I mean, it is possible. I know we talked about this a little bit in the Brexit, that it could be the kind of thing where they fall out. It is essentially just disaster. Planes aren't flying, they can't get any food in. And then people have to be like, okay, we have to be adults. And then there's some type of. Kind of transition period or something. As I've said, I'm still. My base case is still at the last minute, they'll figure out something. But I don't know, like.
- [23:53]
A
Yeah. I mean, yeah. As Faisal was saying in the Brexit edition, there is this kind of idea that if. If everything goes to shit and there's no deal, then within sort of five or six weeks, it's going to be so bad that they'll be able to sort of put everything into reverse. But, like, no one knows how that's even possible.
- [24:09]
C
No, Theresa May knows. I feel like she has no idea.
- [24:12]
B
No one has any idea.
- [24:14]
C
Props to Theresa May for sort of. For a. Not quitting like that other guy. Like, at least Theresa May is not a quitter. Can we say that about her?
- [24:22]
A
She is not.
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B
She's a horrible politician, but she's not a quitter.
- [24:24]
C
I mean, she was put in, I think, an untenable position.
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A
Right?
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C
I mean, she's on the proverbial. We call it in the glass cliff. You put a woman or a minority into a position of leadership, just when that position is like a shit show and you're like, here, you fix it. Like when Barack Obama elected president.
- [24:42]
A
I'm sorry, but it's not hard. There's a gazillion ways that you can orchestrate a people's vote, some kind of a second referendum. Every single time a country in the EU votes the way that they shouldn't vote, they wind up coming up with a second referendum so that they can change their mind, and they wind up changing their mind. This has happened a dozen times in the history of Europe, and there's no conceivable reason why Theresa May couldn't have orchestrated some way of doing it in the uk. It's entirely on her that she is insisting on pushing forward through this Brexit means Brexit bullshit, when everyone knows that the only way of solving this problem is to have a second referendum and to change your mind.
- [25:23]
B
But how do you get there?
- [25:24]
C
Isn't her party pro Brexit or am I? Are they half and half or so.
- [25:29]
A
That she has a rump of like, 50 MPs who are super, super hardcore Brexit and who are just insane and will never be satisfied with anything. And Parliament as a whole, I mean, God knows, because, you know, it's hard to tell with Jeremy Corbyn leading the opposition, because Jeremy Corbyn is a kind of Brexiteer himself. But I think that there is a way of getting a people's vote through Parliament, and certainly if there's a people's vote, there's a very, very good chance that the country would vote to, you know, take back seats.
- [26:07]
C
I mean, that's what David Cameron thought, right? He said, let the people vote, it'll be fine. And it wasn't.
- [26:12]
B
Yeah, I mean, I.
- [26:13]
C
Like, that didn't work.
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A
Well, I mean, like, we should. Everyone agrees we should never have had this referendum in the first place.
- [26:17]
C
Yeah, no, of course, but, like, you did.
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B
Right. And so I think. I mean, I. Yeah, like, I agree with you, but doesn't it seem like if you. I mean, again, I would 100% support if they just had a people's referendum and they come back and these are people's vote, and say, okay, we're sorry, mistake, but if you're like MP and you're like local area, they all voted for Brexit, and then you're kind of coming and saying, like, well, we're just going to pretend that didn't happen. I think that's going to be politically really hard for a lot of MPs.
- [26:44]
A
Right? Yeah, my heart. I mean, it's true that the map is tough, right, because there's a minority of MPs who have constituencies which are like 80, 90, 95% in favor of Remain, you know, in London and places like that. And then there's a majority of MPs who represent constituencies which voted to leave. And so in that sense, if the MPs vote with their constituencies, then the MPs are pro leave. But the fact is that there are 15 different things that people were voting for when they voted leave. And this agreement that is now facing the country, this draft agreement that is now being presented by Theresa May, is none of those 15 things. Like, no one was voting for this.
- [27:31]
B
Right. Well, people were also voting for something that was impossible.
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C
That's what happens when you vote for an ideal that's not practical.
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A
Okay, Anna Shymansky, give us the latest on point 72 Asset management or whatever it's called.
- [27:49]
B
Well, I think Stevie Cohen's been in the news a little bit, partly because he's been making some statements about whether we're going to be entering a bear market. But then people were commenting on the fact that he was able to raise $5 billion this year. And then I think that was discussed as this idea of kind of surprising to some people with the idea of like, oh, after everything with SAC Capital and the fact that he probably should have gone to jail, that he conceivably was able to raise this money so easily.
- [28:15]
A
So let's back up a bit. Stevie Cohen is a hedge fund manager. He's one of those kind of things like billions style hedge fund managers, literally.
- [28:25]
B
That is who initially they based on.
- [28:27]
A
So like when people think about hedge fund, like when Americans think about hedge fund managers, they often think about people who are going long, going short, trading the stock market. And that's exactly what Stevie Cohen does. He's not what Brits think of when they think of hedge fund managers, which is generally like George Soros betting on the pounds, crashing out of the erm. This is not big macro bets, this is just trading the stock market.
- [28:53]
C
And he's not. Because in my initial conception of such a person, I thought more of a quant type person. But Steve Cohen's really old school trader.
- [29:03]
A
Give me the information, give me the edge.
- [29:05]
C
I mean I'm what. The black edge. And what got him in trouble was essentially trading on inside information, which is not novel and has nothing to do.
- [29:12]
A
And so his firm was prosecuted, he had to pay a massive fine. He was barred from running any outside money. So he was down to his last 14 billion of his own personal wealth. Poor guy. And, and then eventually that ban on running outside money ran out and he gave this quote to Bloomberg saying, you know, well, we need to grow. Everyone's like, no you don't, you already have 10 billion. But he decided that he wanted to grow and he wanted to start running outside money again. So he apparently like makes five phone calls and the next thing you know, people give him $5 billion.
- [29:47]
C
Okay, that's what he said.
- [29:48]
B
Yeah, this is where I'm really gonna like push back. Because on the one hand, like if you look back to when they, when he first started talking about marketing this fund, they were not talking about 5 billion, they were talking about 10. And above, like, when he was first talking about marketing this fund, and then when they actually went out and were talking to clients, they had to really scale that back. One thing also, when he's like, yeah, I took one trip, and then we had people writing all these tickets for, like, billions of dollars. That didn't happen. I'm sorry. That didn't happen 100%. That didn't happen. Like, I. This personality type I know so well. And, you know, the fact that he's saying that, to me is evidence that it was actually quite hard, probably, for them to raise this money and that he's defensive about it. So that is why he's trying to pretend that it wasn't as hard as I assume it.
- [30:29]
A
So why. Why does he want to be running other people's money again?
- [30:35]
C
Because he wants to make a lot of money.
- [30:36]
B
Yeah. You want to make money with other people's money. Of course you do. Why would you rather make.
- [30:40]
A
Yeah, he's just like, he's not rich enough. That's basically the problem. He needs to be rich.
- [30:44]
B
Well, it's not just that. It's actually. You know, this is the thing, though, I think sometimes when people think about these guys is this idea of, like, oh, they just want to be richer. And to me, it's not that they want to win. Yeah, it's about winning. So it's, like, about getting more points in the game. And so, you know, you use a lot of outside people's money, you can get more points in the game. That's what it's about. It's not because they're like, I want to go buy another, you know, Damien Hirst sculpture.
- [31:03]
A
So, wait, what does he win?
- [31:05]
B
He wins. I mean, he wins feeling like he's the best trader in the house. And that's it. I mean, like, it's. You see these guys? This is what it is. It's like they compete against everyone for everything.
- [31:13]
A
But, I mean. Okay, so here's my question. It's like, if you want to show that you're the best trader in the house, don't you just rack up the highest returns? And doesn't it actually become harder to rack up higher returns when you're running more money?
- [31:26]
B
If you take weight, too much money, then, yeah, I mean, it is true that if you have way too much money, it is actually hard to find a place for it, and it is actually hard to find good returns.
- [31:33]
C
I mean, he's so. He had very good returns when they were doing insider trading at sac. SAC Capital, which was his Old firm. The returns were like crazy 30% or something like that. And he doesn't charge 2 and 20 like all the other hedge funds are you. He charges 2.75 and 30. So he charges.
- [31:51]
A
This is even on the new money?
- [31:52]
B
No, this is on the new money. On the new lockup period. I think there's like a, A three year lockup period.
- [31:56]
C
Yeah, I mean, so. Which is pretty audacious. And then I read in Bloomberg his returns last year were only 10%, which.
- [32:03]
B
And he did that with a lot of leverage. He did that with like fees nine times.
- [32:06]
C
Giving this guy money is what I want to know.
- [32:08]
B
Yeah, I mean, like, I kind of agree with you there. I do think that, like there is still, you know, you talk to people, even though. Yes, of course people know that part of the reason he was making those returns is because that he was engaged in insider trading. But there still is a sense, a lot of people have that, like, he's a really good trader. I mean, this is something that you hear from a lot of people who, who kind of know. And I think as we're moving into a period where the market is much more volatile, that is a market where his type of strategies in theory would work better. But I, I agree with you that I, I am still a little skeptical, as I've said, about also how easy it was for him to raise this money because you're talking about higher fees at a period where clients are pushing back on fees and also where there has been a lot of, you know, press out there about him having a hard time getting a lot of really talented investors on board. He has a lot of apparently like young guys there who actually like, you know, never really been through a volatile market. So it's, I do question, like, I'm curious who the clients are.
- [32:59]
A
So what's your bet? I mean, who do you think is, is the $5 billion that he got?
- [33:05]
B
I mean, I'm not going to say any like specific client names, but I mean, it is. Having said that, like, look, you do notoriously have a lot of state pension funds that are all underfunded, so they need yield. So there is a possibility you could get some of them who might want to say, look at the returns this guy had in the past. Maybe he could replicate that in this environment. You know, you, you're, I mean, it's going to be the big institutional investors. It's it for the most part. I, I would think that mostly American, not necessarily. I mean, you could probably have a lot of other like sovereign wealth funds and stuff. I mean, it's normally going to be sovereign wealth funds, pension funds, endowments. Now you might get some money, but no, I mean, you might get some clients who are going to be a little scary about being, you know, connected with someone who has this kind of dodgy past. But he has done to kind of bring in a huge compliance team and to try to make this kind of big show saying, like, no, look, it's all going to be clean this time. Which, you know, who knows, could potentially be true.
- [34:01]
C
Speaking of the dodgy past making people want to avoid this man, Matt Levine in his newsletter had highlighted this interesting research which basically said that when banks get a lot of banks or other investment institutions get a lot of press for being like evil essentially and doing, doing bad, that that actually makes people want to work with them more because they're like, oh, they're doing the best kind of work. They're, they'. I think Levine said something like, these guys went to jail, like the traitors at sac. Not Cohen, because he was never charged because he's good at getting out of stuff. But some of them could not recall guilty.
- [34:36]
A
It looks like Tim Liesner at Goldman Sachs is gonna wind up going to jail and probably Roger Eng as well. And so now the question is, I mean, it's an interesting question. Now that we've seen what's happened to SAC and we've seen this paper, the new CEO of Goldman, David Solomon, came out with a sort of mea culpa saying, oh, this is very bad and this doesn't mean this isn't what we stand for.
- [35:00]
C
Please, everyone's like, of course it is.
- [35:02]
A
But is it actually secretly good for Goldman that they're in so much trouble over one mba?
- [35:06]
B
No, I don't think so. Like, I'm sorry, like I, I will also say, like, I was looking at that paper and like, it was like if their, their way of saying whether a company was like, like had a bad reputation was like, if articles use the words dubious and gamble and fierce. I mean, it was like the most unscientific way of determining.
- [35:25]
A
And I'm like, I use the word dubious, man, and that's scientific. When I use the word dubious, that, that's highly scientific.
- [35:32]
B
Like, yes, if you have a firm that is probably the most well connected and the most profitable, guess what? They're probably going to be in the news the most. And it's probably not always going to be for good things. So I don't know, the whole study I was very dubious about, but I will say I do think there's a difference between ruthless and corrupt. Like, I can see potentially being, like, I want the shark on my side, like that. I could kind of say there could be a little bit of that, but I think there's a difference in that. In, like, outright being criminal. And I'm sorry. There are also firms that have really good reputations, and it helps them. It definitely helps them with clients on Wall Street. Yeah.
- [36:03]
A
Give me an example.
- [36:04]
B
I can't.
- [36:06]
C
She can't.
- [36:07]
A
You can.
- [36:07]
B
Okay. Well, I can tell you, actually. Okay, I will tell you the firm I used to work at. No, I know this is going to be. No, they actually, like, I'm not just saying this because I used to work there. Like, they legitimately have a really good reputation, and it really helps with clients. Like, it does. And so that's why I'm a little, like. I question when people say, like, oh, you know, if you have this horrible reputation for essentially being criminal, that's going to help you. And I'm like, have you been in client meetings? That's not the sense I get.
- [36:30]
A
I think, you know, if you talk to clients of, like, Elliot, say, which has, you know, which has definitely got a reputation for being ruthless, you know, that's why they invest with them.
- [36:39]
B
But that's ruthless. That's not corrupt. That's different. Like, hey, you know, like, it's a.
- [36:43]
C
Very murky edge between ruthless and corrupt. Right.
- [36:47]
B
True.
- [36:48]
C
Sac. I don't. Was it ruthless? I don't know if that's. They were just, like, corrupt.
- [36:53]
B
Well, no, I mean, like, they, like, legitimately were, you know, using those expert networks where you had Matthew Martoma, who was, like, the big guy at the center of it, who was essentially, like, budding up to these, like. Like, professors to try to get information. It was so sad. If you actually read the book about it, it's really sad. No, I mean, what they were doing was just, like, out and out illegal.
- [37:11]
C
That was my other question that I wanted to ask Anna and Felix, because I don't think I've had this discussion with y' all since I've been on the podcast, but what SAC did. Insider trading, essentially. A lot of people think it's. It's no big deal. There's no other.
- [37:25]
A
It is a. It is a victimless crime.
- [37:27]
C
Is it? Are you sure?
- [37:30]
A
It is very, very hard to point to anyone who was harmed by, you know, SAC Capital having advanced information about drug trials. Now, is it the one man, should he go to jail for it? Yes, but it's hard to point to a victim.
- [37:48]
C
What about the man that Matthew Martoma, the research scientist that was studying Alzheimer's drug, who got totally worked over by Martoma, thought he was his BFF and like is just this elderly man who, I mean his career is bas been destroyed, right?
- [38:01]
A
He thought, well, he was. He also engaged in criminal activity. Like you can feel sorry for him, but he is a criminal. The point is that like if you're painting, if you're painting him as the victim, then you know, the, the criminal and the victim are the same person.
- [38:17]
B
So I actually have a little bit of a different take on this. And I'm not gonna lie, part of this has to do with having like, had to go, go through so many like, like ethics training things and having to like, you know, do the ethics on the CFA that like, I will say I do think that there is something to having capital markets that people have some sense that there's are some rules that people are following. And I know you're going to say that I'm horribly naive.
- [38:43]
A
No, no, that's true. I totally agree that there are good reasons to have criminal statutes around insider trading. I am not saying it should be legalized. I think that if you do it then you should be prosecuted criminally. I'm not disagreeing with any of that. I'm just saying there's no victim.
- [39:03]
C
Do you think also in the kind of like, the kind of short term trading that Cohen is sort of known for, like dipping in and out, doing, not investing for the long term that has detrimental effects on the market and on business.
- [39:15]
A
He's a liquidity provider. You know, he does price discovery. It's like, I mean it's the whole, it goes up to the whole question of like, why do we have public markets at all? You know, the reason, you know, there is at some level a benefit to having public markets rather than just for.
- [39:32]
B
Anyone who has investments, there's some benefit.
- [39:34]
C
Okay, so it's not because a lot of people complain about like short termism now.
- [39:38]
B
No, that's nonsense.
- [39:41]
A
It's okay. We're going to have a segment about.
- [39:43]
B
Sorry, I didn't mean that to you.
- [39:46]
A
No, I mean we're going to have a segment about this because it's super, you know, as Emily says, it's super trendy. Everyone from Larry Fink to Jamie Dimon are going on about the evils of short termism. We will explain whether they are right or wrong in a future segment about the evils of short termism.
- [40:03]
B
You know where I stand.
- [40:06]
A
But for the time being, I think we should have a numbers round and we'll make it a short term.
- [40:12]
B
Short term numbers round.
- [40:13]
C
Only short term numbers.
- [40:14]
A
Well, we'll make it a lightning round where you need to come out with your number within a round trip amount of time of less than like one second. Do a quick trade. Quick trade.
- [40:24]
C
You go first.
- [40:26]
A
No, I can't do that. I'm going to break my.
- [40:28]
B
I probably could.
- [40:31]
A
My number, you know, for shits and giggles, is 1.55%, which is the coupon on the new Eurobond from Kazakhstan.
- [40:47]
B
Kazakhstan? I thought that's where that was. Wow.
- [40:52]
A
This is. Yeah, this is the. And this is trading above par already. So this is, this is the yield. You can buy a five year Kazakhstan bond denominated in euros and get one and a half percent interest on it.
- [41:05]
B
That's amazing.
- [41:06]
C
Okay, I don't think I'll do that.
- [41:08]
A
Don't do that.
- [41:09]
B
That's a horrible idea.
- [41:10]
C
Listeners. Don't do that.
- [41:11]
A
Listeners, like, yeah, we are giving you investment advice. Don't go out and buy the Kazakhstan euro bond. Like, no good can come of it.
- [41:19]
B
This was it over subscribed.
- [41:21]
A
It was.
- [41:22]
B
Does not surprise me. My number is $19.82. That is the price of the new Millennial Monopoly game. So.
- [41:32]
A
Millennial Monopoly.
- [41:33]
B
Yeah.
- [41:33]
A
So I can't even pronounce.
- [41:34]
B
I know too many M's. So Monopoly came out with this new version that is for millennials, where you can't buy any real estate in the.
- [41:42]
C
Game because they say you can't afford it.
- [41:45]
B
And it's all about gaining experiences. And they have things like, you know, you, you, you know, if you earn something, you get to go to like the vegan restaurant. It's like every stereotype you can possibly think of. But I feel like at first when I looked at, I was like, oh, this is kind of horrible. But then the more I was looking at, I was like, this is so horrible. It's kind of awesome because it's just like every single stereotype put in one game and you can tell. And even like the response from Monopoly, like they're clearly just. They knew this was going to be the exact response. So they're just playing off. And I think it's kind of amazing.
- [42:13]
C
That's amazing. Yeah, I can't beat that. My number is 6. That's the number of basketball games at a minimum that Dwyane Wade, who plays for the Miami Heat is going to miss because he's taking paternity leave. Which is notable because Usually professional sports players do not take paternity leave at all. And even if they take a little bit of time off, they are just excoriated for it as, like, weaklings and letting everyone down. So it's kind of, I think, interesting that. But Wade isn't getting really any pushback and he's getting celebrated.
- [42:43]
A
How, like, much time is that?
- [42:46]
C
Six games. It's a couple weeks.
- [42:47]
A
I think it's a couple basketball games.
- [42:50]
B
You can play more than once.
- [42:51]
C
Yeah, I mean, it's not a lot of time in the grand scheme of things. And paternity leave time, if he was.
- [42:56]
A
Like, I want six months of paternity leave, they might be less prone to go along with it.
- [43:03]
C
Really, that he's taking any at all and talking about it publicly is kind of a.
- [43:06]
B
Big.
- [43:07]
C
Is actually kind of a big step. And we want more men to take paternity leave because it sort of evens the playing field for women, too.
- [43:15]
A
Okay, I think that's it for us this week. Thank you for listening to Slate Money. I think next week we're gonna have the most amazing show. If all goes according to plan, and I hope it does, Anna and I are going to geek out at a level that. That is impressive even by Slate Money standards. With the doyen of sovereign debt restructuring, Mr. Leibukheit himself is going to venture across the east river and going to come into the studio and we're going to talk about every kind of crazy thing. Along with Mitu Gulati, we're going to talk about Puerto Rico, Argentina, I don't know, maybe Dominica, Peru, Ecuador, Ukraine, Pakistan. I don't know what we're going to talk about. We have so much to talk about. It's Greece. Of course we have to talk about Greece. That was his, like, you know, brainchild. All of these amazing places who borrowed a whole bunch of money, defaulted, couldn't pay it back, and then what happens? There's one person on planet Earth who understands the answer to that question better than anyone else, and he is coming into the studio, so. So tune in for that. And we're going to have a Slate plus segment on wildfires in California. Otherwise, if you're not a Slate plus member, well, become a Slate plus member. But if you don't. Thanks for listening, and thanks to Max Jacobs and keep the emails coming. The email address is slatemoneylate.com and we will talk to you next week on Slate Money.